Vermont Exercising Option to Balance the Budget

The only state without a budget-balancing requirement has turned out to be a fiscal goody two-shoes.

ABBY GOODNOUGH

MONTPELIER, Vt. — Technically, Vermont could play fast and loose in this season of fevered budget-chopping: it happens to be the only state with no budget-balancing requirement.

But Vermont, it turns out, is a fiscal goody two-shoes.

This spring, the Democratic-controlled Legislature toiled to close a projected $176 million gap in its $4.6 billion budget for the coming 2012 fiscal year with a combination of spending cuts and scattered tax increases. Gov. Peter Shumlin, a newly elected Democrat, said Vermont was so innately frugal that it had no use for a balanced-budget law.

“Vermont has more common sense than the 49 other states,” Mr. Shumlin said in a recent interview. “We pay our bills, live within our means and hold firm to the tradition of not spending more than we take in.”

But not everyone here is pleased about the thriftiness, especially when it means cutting services. State Representative Paul N. Poirier, an independent, said his colleagues should have raised taxes on the wealthy instead of cutting programs for the elderly, mentally ill and developmentally disabled.

“In the last three years, our little state of Vermont has cut over $300 million in direct services to people,” Mr. Poirier said. “Why not ask people who have done well during this recession to step up and pay a little more?”

Some wealthy Vermonters agreed, going so far as to publicly ask Mr. Shumlin to raise their taxes. In a letter last month, about 50 of them — including Ben Cohen and Jerry Greenfield, the Ben & Jerry’s ice cream titans — beseeched Mr. Shumlin to “help meet basic human needs” by imposing a temporary income tax surcharge on the top 5 percent of earners.

Both the House and the Senate rejected the proposal. Mr. Shumlin, too, said thanks but no thanks.

“I’m very grateful to them for their generosity,” he said. “But we’re already asking a lot of our wealthy residents.”

Among other things, the planned cuts would reduce the number of substance abuse counselors in high schools and scale back programs that help elderly people stay in their homes and avoid moving to nursing homes. On Friday, the Senate approved a budget plan that would also increase the cigarette tax and raise taxes on health care providers.

State Senator Ann Cummings, the chairwoman of the Finance Committee, said that carrying over a deficit was unthinkable, partly because the state already anticipates a shortfall of $60 million in the budget for the 2013 fiscal year.

“It’s like charging groceries,” she said. “Once you start, if you don’t have a reasonable expectation that the money is going to be there, it’s just a snowball going downhill.”

Mr. Poirier and others who think the state is being too prudent point to the early 1990s, when Gov. Richard A. Snelling, a Republican, addressed a budget crisis in part by carrying over deficits for several years and temporarily raising taxes on income and sales.

“It really was a boon to be able to do that,” said Jack Hoffman, a senior policy analyst with the Public Assets Institute here, a liberal-leaning research group. “We worked our way out of the hole over time instead of making these really drastic cuts.”

Mr. Hoffman is among those who expressed frustration that Mr. Shumlin and legislative leaders have refused even to borrow from the state’s reserve fund, which currently holds about $55 million, to avoid service cuts.

“I don’t know what they’re waiting for,” Mr. Hoffman said. “I worry that we’re going to come through this recession, get to the other side and someone will proudly say, ‘We never touched the rainy day fund.’ ”

Others say that next year could be the biggest test of Vermont’s flintiness because the last of the federal stimulus money that has helped states survive the recession is scheduled to disappear.

As for why Vermont has never passed a law or amended its Constitution to require a balanced budget — something every other state has done, though some are looser than others in their definition of “balanced” — even the state archivist, Gregory Sanford, said he had no clue.

“There apparently has not been much of a clamor for one,” Mr. Sanford said in an e-mail after searching for evidence that anyone ever tried to propose a balanced-budget amendment here. Given the deep fiscal problems of some states that have such requirements, like New York and California, Mr. Sanford said, “I am not sure what the value of such an amendment would be.”

Former Gov. Jim Douglas, who left office in January after eight years, theorized that Vermonters would actively resist such a check if it were suggested.

“Vermonters like to think of ourselves as able to make sound decisions,” Mr. Douglas said, “without the heavy hand of a constitution or government forcing it.”

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